Money Concerns Sap Mental Capacity

Poor and working people’s continual worries about money cloud their thinking and make it more difficult to perform simple tasks, concludes new research in Science magazine.

This finding came out of two very different experiments – one at a New Jersey shopping mall, the other in India’s sugar cane fields – by an international team of economists and psychologists.

In the first experiment, wealthy and low-income shoppers – $70,000 in household income was the cutoff between high and low – were seated in front of computers and quizzed about a variety of financial scenarios designed to trigger thoughts of their own money concerns.

For example, they might have been asked whether to pay for a car repair with a loan or cash or to forgo the work altogether.  Some of these scenarios were relatively easy to resolve – say, the car repair cost only $150.  In a difficult scenario, it might cost $1,500.

After answering a series of easy and hard financial questions, the shoppers performed simple tasks often administered by psychologists, such as picking the shape that best fits into a group of other shapes.  Rich and poor performed similarly on the tasks after they were presented with the low-cost scenarios.  But the high-cost scenarios caused the poor to perform significantly worse.

A brain distracted by financial problems is “like a computer slowing down when you run too many things at once,” said Eldar Shafir, a Princeton University professor of psychology and public affairs.

What the low-income people experienced was something other than stress.  Instead, Shafir said, thinking about financial issues interfered with their working memory, creating “cognitive-system overload.”

The findings may shed light on such problems as why the poor don’t adhere well to medication regimens or why poor farmers don’t weed their fields as often as rich farmers do, he said.

A second experiment in India revealed the same kind of cognitive overload.  Sugar cane farmers were tested at two different times in the growing season: prior to harvesting their crops, when they were low on resources and felt relatively poor, and after the harvest, when they felt flush.

Again, the researchers found that the “rich” farmers – post harvest – did better than farmers tested prior to harvest.  The different results could not be explained by time of year of the harvest, low literacy levels, stress, physical exertion or hunger – the experiment’s design and statistical controls were adjusted to eliminate these effects.

To understand what cognitive overload feels like, imagine how well you might do on a test after losing a night’s sleep.

One of Squared Away’s early blog posts featured a game that simulates the financial dilemmas faced by the poor.